After 7th Pay Commission, government to now double tax-free gratuity to Rs 20 lakh

The Payment of Gratuity (Amendment) Bill was passed in the Rajya Sabha on Thursday without any discussion. The Bill will enable the government to increase the ceiling of tax-free gratuity to Rs 20 lakh from Rs 10 lakh for employees under the Payment of Gratuity Act. The law is applicable to the employees who have completed at least five years of service in an entity that has 10 or more employees. The Bill will also empower the government to fix the maternity leave for female employees as deemed to be in continuous service in place of the existing 12 weeks with an executive order. The amended Bill will benefit lakhs of employees who work in the organised sector, especially women, Labour Minister Santosh Kumar Gangwar said.

Over the past fortnight, the Upper House of Parliament had not transacted any significant business due to protests by various parties. The Bill, moved by Gangwar, was passed by a voice vote, fulfilling the long-pending demands of the employees unions. The Lok Sabha had passed the Bill last week.

After the implementation of the seventh Central Pay Commission, the ceiling of gratuity amount for central government employees was increased from Rs 10 lakh to Rs 20 lakh. The bill also notifies the period of maternity leave as part of continuous service and proposes to empower the central government to notify the gratuity ceiling from time to time without amending the law. The amendment to the payment of gratuity law comes in the backdrop of Maternity

Benefit (Amendment) Act, 2017, enhancing the maximum maternity leave period to 26 weeks. At present, formal sector workers with five or more years of service are eligible for Rs 10 lakh tax-free gratuity after leaving job or at time of superannuation. A senior government official said that the government wants to provide tax-free gratuity of Rs 20 lakh to organised sector workers at par with the central government.

The Payment of Gratuity Act, 1972, was enacted to provide for gratuity payment to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. The law is applicable to employees, who have completed at least five years of continuous service in an establishment that has 10 or more persons.

With PTI inputs